By Cassie Fish, http://cassandrafish.com
CME cattle futures have put in an impressive and powerful performance this week and most active Jun LC is now closer to the 40-day MVA than the 10-day as the market continues to accelerate. Jun LC is now 680 points higher than last Fridayâ€™s dismal low and holding its gains. It is all about Jun LC too, with the bull spreads kicking hard.
The cash trade this week will likely be fully steady to higher and it is thought most, if not all packers need to buy some though no packer have tipped their hand as of yet. Packers have been moving contracts up rather than chasing the negotiated trade but bigger kills deplete supplies quicker. Forward contract numbers for May are thought to be down from last month, next month and a year ago.
This weekâ€™s kill is expected to be a monster, 592k to 599k, with 40k tomorrow. Yesterday, actual slaughter and weight data was released, the news was bullish and futures responded with a rally. The actual kill for the week ended April 23 was the largest fed kill since August 2014. Better yet, steer weights dropped 8 pounds and heifers dropped 13 pounds. A resounding â€œfinallyâ€ was heard. There is widespread talk that there is â€œnothing behindâ€ the big cattle that are finally, mostly dead and speculation it will be July before bigger numbers come on deck.
The cutout hasnâ€™t started its rally yet but it is widely anticipated it will next week. This weekâ€™s wholesale beef business was some of the best experienced in a very long time. There are hints that next weekâ€™s kill will fall short of this weekâ€™s level, dropping back down into the 580s.
CME cattle futures will close higher on the week and guarded optimism about the coming weeks, the midst of premium beef demand, is widespread. How much higher cash is this week and the rest of the month, kill levels in May and June and clearance of product to the consumer in coming weeks will set the stage for the remainder of 2016. At least for today, things look greatly improved from only one week ago.